Air Force: Greater use to push Boeing tanker cost up 11%

The lifetime projected operating cost of Boeing Co.'s new KC-46 refueling tankers rose 11.2 percent last year, but the Air Force says the increase stems from plans to use the new planes more than initially expected, not any performance problems.

Maj. Gen. John Thompson, who runs the KC-46 program, briefed lawmakers on the projected cost increase Tuesday, assuring them that the program remained on track and that the change would not affect the Air Force's overall budget.

Federal law requires military officials to brief top Pentagon leaders and U.S. lawmakers if weapons programs exceed their baseline estimates by 10 percent or more.

Thompson told Reuters that a 37 percent increase in projected flying hours would drive up the estimated lifetime operating cost of the new planes to $103.1 billion, from an original estimate of $92.7 billion.

But he stressed that the overall program remains on track and that there were no projected increases in projected development or procurement costs, which are likely to remain steady at around $52 billion.

The new operating cost estimate assumes a lifetime of 40 years for each of the 179 new tankers being developed by Boeing.

Thompson said the estimated operating and support costs went up because Air Force Mobility Command plans to fly the new planes about 670 hours a year after fiscal 2020, 37 percent higher than an earlier estimate based on the average hours flown between 2004 and 2008 by the current fleet of KC-135 tankers.

The new tankers can also carry out medical evacuations, accommodate passengers and cargo, and transport more fuel than the KC-135 tankers, all of which will make them more heavily used.

The planes are also more fuel-efficient, and are expected to be more reliable since they are based on a well-established commercial Boeing 767 airliner, Thompson said.

The U.S. military's planned pivot to the Asia-Pacific region, with its vast expanses of land and oceans, will also trigger greater use of the new tankers, which act as a flying gas station for fighter jets and other warplanes.

"It just makes sense to use this more capable tanker more, given this basing strategy and this concept of operations," Thompson said.

BOEING SAYS ON TRACK FOR 2018 DELIVERY

Boeing remains on track to deliver the first 18 of the new tankers to the Air Force by 2017, said spokesman Jerry Drelling, who added that the planes' operational flexibility would allow for an expanded role.

Thompson said the Air Force's revamped plan called for each plane to have one extra crew than initially planned. Each crew comprises a pilot, co-pilot, refueling expert and a load master.

Col. Shaun Morris, KC-46 director of program control, said increasing the number of air crews would allow the Air Force to use the planes more effectively.

Thompson said the Air Force would shift funds from other accounts linked to the KC-135 tankers to avert any impact from the operating cost increase on the KC-46 to its overall budget.

"The Air Force is not planning any increase to its topline budget," Thompson said. "It's a zero-sum game."

The Air Force's KC-46 tanker program in November and December updated its original estimates for the program, which had been based on the usage, maintenance rates, support costs, staffing and operational plans of the KC-135 tankers.

The Air Force initially projected that the lifetime cost of operating the new planes over a 40-year lifespan would be $92.7 billion, but held off publishing the figure until it knew more about basing and usage plans.

Now that some of those decisions have been made, Thompson said the program office was able to make better-informed forecasts, although he noted that the higher usage rates would not kick in until after fiscal 2020.

Thompson said Boeing had met all its requirements under its fixed price development contract.

A risk assessment in November concluded with a confidence level of more than 80 percent that Boeing would be able to deliver the first planes in 2018, as planned, he said.

Thompson said the program faced some issues with software, weight and the need to redesign certain components, but those were typical for new aircraft development programs.

"There's nothing that gives us great pause in terms of a horrific risk to the program," he said.

The program is due to have a critical design review before the end of September. The plane is also awaiting an amended certification by the Federal Aviation Administration (FAA), which will likely occur this month.

The plane is expected to wrap up developmental testing in 2015 and start initial operating tests in 2016.